Those of us in the yes-in-my-backyard camp like to point out that increased housing supply is good for the overall health of a market because it moderates price and rental growth. And to point out just one example, there's evidence of this happening right now in Austin.
But one of the common objections to this mental model is that the new housing getting built is simply not affordable. It's high-income housing. So how is that helpful to someone who maybe can't afford the rents? And to be fair, this is generally true (unless there are subsidies involved that are allowing the homes to be offered at below-market pricing).
The reason this is true is because development "happens on the margin." Meaning, virtually every new project just barely makes economic sense to build. Developers have to be very precise about their costs and often have to embed some degree of optimism into their revenue assumptions in order to arrive at feasibility. This means that new home prices and rents are almost always at the very top end of what's achievable in a market.
But this market reality doesn't just benefit the people who can afford high-income housing. For one thing, brand new expensive housing eventually becomes older and more affordable housing (this is referred to as filtering). But even in the immediate term, new supply serves the important function of relieving some of the pressures on a city's existing housing stock.
Think of this way: If you're a high-income household that could afford new housing — if only it were being built and available — well then you're just going to seek out the next best thing. And because you're a high-income household, you have the ability to outbid middle-income households for whatever housing happens to be available on the next rung of the ladder.
This is what the research shows. In a recent study by Pew, it was found that building more housing — both across a metro area and in specific neighborhoods — tempers rents across all classes of buildings. Importantly, though, it was found to decrease rents the most for older, more affordable housing:
Looking at more than 41,000 large apartment buildings in 223 metro areas, there was a clear trend: Class C rents decreased more, relative to those for units in Class A buildings. In high-supply metro areas (those that increased their housing stock by at least 10% from 2017 to 2023), rent growth was slower than in average markets. Crucially, rent growth slowed most for Class C units, demonstrating that the additional supply was especially helpful to people living in lower-cost apartments.
It's understandably easy to look at new housing and say, "that's too expensive and therefore useless to me." Market dynamics usually make this a prerequisite for construction. But there are still direct benefits and that's what you're seeing in the above data.
Cover photo by Marc Kleen on Unsplash
As you know, sixplexes are now permitted in certain parts of Toronto. We've spoken before about how it should be all of Toronto; but nevertheless, they are allowed in areas where they were not allowed before. That constitutes progress.
But it gets much better: This week, Mayor Chow announced that she will be bringing forward a motion to Council to eliminate development charges and parkland dedication cash-in-lieu requirements for new developments of up to six residential homes. This is a big deal and something that is necessary if we want to spur more rental housing.
To quote my friend Craig Race (of Craig Race Architecture), "this is the first thing [Olivia Chow has] done I'm happy about, and I hope to see more." Mayor Chow was criticized for standing around while sixplexes were being debated, and so this is perhaps her now trying to step up. Whatever it is, home builders will take it.
Globizen wasn't looking at this scale before, but I'm now going to adapt one of our screening models to see if the math works. If it does, then expect the industry to mobilize around it.
Urbanation just released its Q2-2025 condominium market survey results for the Greater Toronto & Hamilton Area. The results are as expected: new home sales are slow (like, 91% below the 10-year average) and unsold inventory is rising. But what I'm most interested in is trying to guess the future.
Urbanation expects a total of 17,117 condominium homes to complete in the second half of this year, which would bring total completions for 2025 to 31,422 homes (which is an elevated number). Completions in 2026 are then expected to drop to a more "historically normal level" of 18,037 units.
At the same time, there are 64,623 condominium homes under construction as of Q2-2025. I take this to mean that, once the above 17,117 homes complete in the second half of this year, there will be at least 47,506 new homes still under construction as we start 2026.
If we do end up completing 18,037 units next year, and ignoring any new starts, that will leave just under 30k units under construction into 2027. If completions remain at a similar level after this, we could then be close to building our way through this condominium pipeline by the end of 2027.
Of course, this says nothing about actual absorption. It's one thing to build a new home, but it has to ultimately get filled. And right now, there are almost 2,500 unsold condominium apartments in newly completed projects across the region. This is a record high going back as far as 2005.
So it's hard to say. But my view continues to be that, by 2028, we should be on the other side of this market. In the meantime, if you're looking for a place to live in Toronto, I think you'd be hard pressed to find a better time to buy. Most people will be too scared, and that's the point.
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